I. INTRODUCTION:
In recent years much has been written about the protection of software. There are those who are pro-copyright, pro-patent, pro-sui generis and those favoring or opposing various combinations of the foregoing. This paper does not take a position on what law may afford the greatest protection for software, rather, this paper is intended to serve as an introduction to the existing protection afforded by the laws of copyright, patent, and trade secrets, the principle laws protecting software. Also addressed are trade dress protection for software and the enforceability of shrinkwrap licenses.
At the outset, a few basic definitions relating to software may be helpful to the reader in understanding the issues discussed in this paper. “Software” is generally defined as “computer programs”, “data bases”, “documentation”, and “user interfaces.” Each term, as used in this paper, is summarily defined as follows:
1) Programs. A “program” is a set of statements or instructions to a computer which will cause it to perform a function. There are two categories of programs. “Operating systems,” like DOS, perform basic internal operations of the computer necessary for all users, such as loading other programs and allocating storage space. “Application programs” such as WordPerfect, allow the computer user to direct the computer to perform a specific task.
A computer program consists of both “literal” and “non-literal” elements. A program’s literal elements consist of the source code, instructions written in a human readable computer programming language such as Basic, and object code, the same set of instructions expressed in computer readable binary language. As the courts have defined them, non-literal elements of a computer program included structure, sequence, organization, screen displays, menu structures and user interfaces.
2) Data Bases. A data base is a machine readable collection of stored data. It may consist of public domain information, such as names and phone numbers, or it may be a collection of full text materials or extracts of works.
3) Documentation. Documentation explains the operation of a computer program or computer hardware and includes user manuals (operational documentation) and system documentation (programmer documentation). A user manual includes such topics as input (the way in which information should be entered), output and information concerning the speed of the program. Generally, user documentation does not describe how information is processed. In contrast, system documentation describes the internal workings of the program and information necessary to make changes in the program. System documentation generally includes flow charts and block diagrams helpful for understanding the functioning of the program.
4) User Interfaces. The term “user interface” is used broadly and includes all the ways that a user interacts with the computer to effectuate the purpose of the program. It encompasses a program’s screen displays, the manner in which a program obtains input from a mouse or typed textual commands and menus which present the user with a list of choices that instruct the computer to perform specific tasks.
The type of protection best suited for particular software depends, in large measure, upon commercial realities such as whether the program is a user created program for use in-house versus commercially available software which is generally marketed to the public. Generally speaking, protection for software is most often sought under the copyright laws, patent laws, and state laws protecting trade secrets. Trade dress protection of user interfaces has been raised by the commentators as a potential source of protection, but few reported cases have addressed the subject. The enforceability of shrinkwrap licenses is unsettled in the courts, but proposed new provisions to the Uniform Commercial Code may tip the balance toward the enforceability of standard form licenses. The protection afforded by these laws can be overlapped.
II. COPYRIGHT PROTECTION
Computer programs were not expressly mentioned or defined in the original Copyright Act of 1976 (17 U.S.C. § 102 (1977)). However, the legislative history provides:
The term “literary works” does not connote any criteria of literary merit or qualitative value: It includes catalogs, directories and similar factual, reference or instructional works and computations of data. It also includes computer data bases, and computer programs to the extent that they incorporate authorship in the programmer’s expression of original ideas, as distinguished from the ideas themselves.
Although nothing in the Copyright Act expressly states that computer programs are copyrightable, § 117 implicitly provides that computer programs are copyrightable and source code and object code have been protected under the copyright laws both prior to and after the enactment of the Computer Software Copyright Act of 1980.
Section 101 of the Act defines a copy as a material object “in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced or otherwise communicated, either directly or with the aid of a machine or device.” Therefore, a “copy” need not be directly perceivable to humans and can be stored on a disk. Section 101 provides that a work is “fixed” in a tangible medium of expression “when its embodiment in a copy . . . by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”
Section 102(b) excludes copyright protection for “any idea, procedure, process, system, method of operation, concept, principle or discovery, regardless of the form in which it is described, explained, illustrated or embodied in such work.”
The exclusive rights of the copyright holder are set forth in § 106. Among these rights are the right to “reproduce the copyrighted work;” “to prepare derivative works based upon the copyrighted work;” and “to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending.”
Copyright protects against copying, but not against independent development. Copyrights subsist for the author’s life plus 50 years after the author’s death or, in the case of works made for hire, 75 years from the year of first publication. Remedies for infringement include preliminary and permanent injunction, impoundment and destruction, damages and profits, and attorney’s fees in the discretion of the court.
1) Registration of Copyrights in Computer Programs. Copyright ownership vests in the author immediately upon creation of the work in a fixed medium. However, registration of the copyright is a jurisdictional prerequisite to bringing an action for copyright infringement. Registration requires the submission of the appropriate registration form, usually Form TX, deposit copies of the work and a $20 nonrefundable filing fee payable to the Registrar of Copyrights. Appendix B to this paper, Copyright Office Circular 61, outlines the information and deposit requirements for submitting an application for copyright registration of a computer program.
The deposit requirements for computer programs without trade secrets are the submission of the first twenty-five and last twenty-five pages of source code in readable form, without the aid of a machine or device, together with the page containing the copyright notice, if any. If the applicant is unable or unwilling to deposit the source code, the applicant must state in writing that the work, as deposited in object code, contains copyrightable authorship. Under these circumstances, the Copyright Office will make the registration under its “rule of doubt” and will send an accompanying letter stating that the Copyright Office has not determined the existence of copyrightable authorship.
For computer programs containing trade secrets, the applicant must include a cover letter stating that the program contains trade secrets. The deposit copy source code submitted may be redacted to block out those portions containing trade secrets.
In June, 1988, after public hearings, the Copyright Office announced that all copyrightable expression embodied in a computer program owned by the same claimant, including computer screen displays, shall be registered on a single application form. Registration will usually be appropriate on Form TX. If pictorial or graphic authorship predominates, registration may be made on Form PA as an audiovisual work.
A copyright registration is effective on the date Copyright Office has received all the required elements in acceptable form, regardless of how long it then takes to process the application and the certificate of registration. Typically, the copyright registration will be received within about six months. It is possible to obtain expedited examination upon submission of a statement explaining why expedited examination is necessary, typically because of pending or prospective litigation, along with a $330 filing fee for the expedited examination.
2) What Does Copyright Protect? Copyright protection does not extend to any idea, procedure, process, system, method of operation, concept, principal, or discovery, regardless of the form in which it is described, explained, illustrated or embodied in such work. However, application of this rule, separating protectable elements from unprotectable elements, has been a daunting task.
Over the years, the focus of the software copyright issues litigated has changed. The first generation of cases focused on copyright protection of literal elements of a program, source code and object code. The Court decisions were close to unanimous in holding that source code and object code are copyrightable and that both application programs and operating system programs are copyrightable. It is now well established that both source code and object code are protectable under the copyright law.
The next generation of cases dealt with the scope of copyright protection in cases of alleged non-literal infringement, including the protectability of the structure, sequence and organization (SSO) of programs. Whelan Associates, Inc. v. Jaslow Dental Laboratory, was the first significant case addressing the copyrightability of non-literal portions of computer programs. In Whelan, the Third Circuit Court of Appeals adopted a methodology by which to distinguish unprotectable ideas from protectable expression. The defendant in Whelan had access to Plaintiff’s source code and then created a functionally similar program in a different programming language designed to automate the business of operating a dental laboratory. Both programs performed the same functions, produced similar outputs and had similar user interfaces including file structures and screen displays. However, there was no finding by the trial court that Defendant’s program incorporated the source or object code of the original program.
The Whelan Court first looked at the steps in creating a computer program including problem identification, problem definition, flow charting, formulation of architecture, determination of input, arrangement of data files, coding and certain steps beyond coding. It then adopted a simplistic test for separating ideas from expression. In separating idea from expression, the Court found that “the purpose or function of a utilitarian work would be the work’s idea and everything that is not necessary to that purpose or function would be part of the expression of that idea . . . where there are various means of achieving the desired purpose, then the particular means chosen is not necessary to the purpose; hence, there is expression, not idea.” Whelan held that the substantial similarity of the structure, sequence and organization of the accused program constituted copyright infringement.
The protection of “structure sequence and organization” of a computer program has been criticized as extending copyright protection too far. Commentators opined that Section 102(b) of the Copyright Act, which precludes protection of any “procedure, process, system, [or] method of operation” created a significant bar to protection of the structure sequence and organization of computer programs. In more recent cases, several Courts have rejected Whelan’s infringement analysis.
Following Whelan and ending with Lotus Development Corp. v. Paperback Software Int’l., the trend was to give broader protection to non-literal elements of copyrighted programs. The focus, in the 1990’s, is: “Under what circumstances, and subject to what limitations, should copyright protection of computer software extend both to code and non-code elements of programs?” This question, frequently referred to as the “look and feel” issue, addresses the proper scope of protection extended to non-literal features, such as user-interfaces.
In recent years, Courts in the 2nd, 5th, 9th, 10th, and 11th Circuit have adopted, with minor variation, the successive filtration approach set forth in Computer Associates International Inc. v. Altai, Inc. Under the Altai test, sometimes referred to as the extraction/filtration/comparison test, the Court must first dissect the copyright owner’s program to isolate detectable expression at each level of extraction, ending with the unprotectable idea of the program. Each component part of the program, at each level of a distraction, is “filtered” to filter out unprotectable aspects of the program, such as material not original to the author, expression in the public domain, and expression dictated by external factors such as compatibility with other programs. Finally, there may remain a core protectable expression, which the Second Circuit referred to as the “golden nugget” which is then to be compared with the allegedly infringing program to determine whether protectable elements of the original program have been infringed.
It has been said that the Altai test “is the best test for determining substantial similarities — and hence copyrightability — because it most closely adheres to general principles of copyright law. However, the Altai decision is “widely viewed as sharply curtailing the scope of computer software copyright protection.”
The protectability of non-literal aspects of computer programs, such as user interfaces, is still evolving. The following cases have addressed different elements of software related programs that may not be entitled to protection under the copyright laws:
(a) Icons. In Apple Computer Inc v. Microsoft Corp., the Ninth Circuit Court of Appeals, applying a two-part test having “extrinsic” and “intrinsic” components and filtering out unprotectable unlicensed elements concluded that the district court correctly found that “ionic representation of familiar objects from the office environment” were “ideas” and not entitled to copyright protection. The Court found that the “trash can” icon was “a tool to facilitate communication between the user and the computer”, as a replacement for a “delete” key. As to Apple’s “file folder” and “page” icon designs, the Court found that even if they were originals “these particular icons add so little to the mix of protectable material that the outcome would not be reasonably affected.”
(b) Use of Menus/Use of Windows. The Apple Court also held that the use of windows to display multiple images on the computer screen and the use of pull-down menus were unprotectable under the copyright law, in part, because “hardware constraints limit the number of ways to depict visually the movement of a window on the screen” in that “use of overlapping windows inheres in the idea of windows . . . [because] [a] programmer has only two options for displaying more than one window at a time: either a piled system, or an overlapping system.”
A recent Eleventh Circuit decision, Mitek Holdings, Inc. v. Arce Engineering Co., Inc. upheld the district court’s decision that the menu and the submenu command tree structure of the program in issue “is a process that is not entitled to copyright protection.” The Eleventh Circuit ruled that it “need not decide today whether a main menu and submenu command tree structure is uncopyrightable as a matter of law.” The Eleventh Circuit agreed with the District Court’s conclusion that the main menu and sub-menu command tree structure is a process in that it “mimic[s] the steps a draftsman would follow in designing a roof truss plan by hand.”
In Productivity Software International Inc. v. Healthcare Technologies, Inc. the District Court for the Southern District of New York applying the extraction/filtration/comparison test set forth in Altai ruled that the plaintiff’s location of its menu screen was unprotectable because “there are only two locations where a menu bar may be logically placed on a computer screen, the top and the bottom.” The Court also ruled that the use of a separate edit screen “is not protectable under copyright law since numerous computer programs utilize one screen configuration to display data, and another screen configuration to input and edit data.”
(c) Screen Displays. The 11th Circuit Court of Appeals also addressed a claim that the Mitek screen display (itself an audiovisual work), was entitled to copyright protection of the compilation. Noting that “[t]his Circuit has never set forth what standards should be used in analyzing claims of compilation infringement of non-literal elements of a computer program,” it joined the Ninth Circuit in adapting the “bodily appropriation of expression” or “virtual identicality” standard of Apple Computer Inc. v. Microsoft Corp. The standard set forth in Apple Computer is that “there can be no infringement unless the works are virtually identical.” The Court found that as one program depicted commands as icons, rather than as words in the other program, there was no virtual identicality between the two programs.
(d) Interoperability. Interoperability refers to the ability of a program user to use the programs of different manufactures interchangeably or in combination. “To operate a computer program effectively, a computer user must spend a significant amount of time learning how the program works. To assist the user, some software companies have attempted to provide programs that work in the same way as popular pre-existing programs. Such conduct has raised a key copyright question: what in the law prohibits the copying of certain parts of a program to allow the computer user to employ the same skills to operate competing programs.”
One means of achieving interoperability is through the use of identical menu commands. As of the beginning of 1995, it was unresolved whether a menu command hierarchy is a proper subject for copyright protection. In early 1995, the first appellate decision on point was handed down by the First Circuit Court of Appeals in Lotus Development Corp. v. Borland Int’l., Inc. the First Circuit answered the question in the negative. The Supreme Court granted certiorari and subsequently, in a four-four deadlock, the Supreme Court, by default, affirmed the First Circuit ruling that copyright law does not protect the system of menus and commands used in Lotus’ spreadsheet program 1-2-3.
Commentators have opined about the potential implications of the Lotus v. Borland decision. Among the concerns raised are that the First Circuit decision narrows the subject matter that many believed was copyrightable and it raises concerns that courts might extend the decision by finding other user interfaces uncopyrightable as a “method of operation” under 17 U.S.C. § 102(b).
The implications of Lotus v. Borland are yet to be seen. However, it may signal a further move away from the protectability of software under the law of copyright and a move toward patent protection. For that reason, it is discussed at length below.
3) Lotus Development Corp. v. Borland International, Inc., 49 F.3d 807 (1st Cir. 1995)
(a) Facts. Lotus is the creator of “Lotus 1-2-3,” a spreadsheet program that “enables users to perform accounting functions electronically on a computer.” An integral part of the Lotus 1-2-3 program is the menu command structure, which has 469 commands arranged into more than 50 menus and submenus. Users of Lotus 1-2-3 can designate a series of command choices by creating “macros.” Macros significantly reduce the keystrokes needed for performing common series of commands.
In 1987, Borland created Quattro, a spreadsheet program which competes with Lotus 1-2-3. Quattro has its own menu command structure; however, Borland included a copy of the Lotus 1-2-3 command structure in the Quattro program so that users already familiar with the Lotus command structure could use Quattro without having to learn a new command structure and or rewrite their Lotus macros. In copying the Lotus command structure, Borland did not copy any of the Lotus source code or other non-literal elements of the Lotus program, such as screen displays.
(b) District Court Decisions. Immediately after the District of Massachusetts held in Lotus Development Corp. v. Paperback Software International, 740 F. Supp. 37, 68, 70 (D. Mass. 1990) that the Lotus 1-2-3 “menu structure, taken as a whole – including the choice of command terms [and] the structure and order of those terms” was protected expression covered by Lotus’ copyrights, Lotus filed an infringement suit against Borland in the District Court of Massachusetts. In Lotus Development Corp. v. Borland International, Inc., 799 F. Supp. 203 (D. Mass. 1992) (“Borland II”), the district court granted Lotus’ motion for summary judgment in part, holding that the Lotus command structure was copyrightable expression because:
[a] very satisfactory spreadsheet menu tree can be constructed using different commands and a different command structure from those of Lotus 1-2-3. In fact, Borland has constructed just such an alternate tree for use in Quattro Pro’s native mode. Even if one holds the arrangement of menu commands constant, it is possible to generate literally millions of satisfactory menu trees by varying the menu commands employed.
Borland II, 799 F. Supp. at 217. The district court also found that Borland had infringed Lotus’ copyrights as a matter of law, but that a trial was necessary to determine the scope of Borland’s infringement.
Following the grant of partial summary judgment, Borland removed the copy of the Lotus command structure from its products. However, Borland’s Quattro program could still understand Lotus macros. At trial, the district court found that even this feature infringed protectable expression in the Lotus program. See Lotus Development Corp. v. Borland International, Inc., 831 F. Supp. 223 (D. Mass. 1993 (“Borland IV”). The court also rejected Borland’s fair use defense and entered a permanent injunction against Borland. Id.
(c) First Circuit Decision. On appeal, the First Circuit Court of Appeals reversed the district court’s decision, finding that the menu command structure was not copyrightable subject matter.
In making this determination, the First Circuit first noted that the extractions/filtrations/comparison test for determining the copyrightability of non-literal elements of a computer program set forth in Computer Assoc. Int’l. v. Altai, Inc., 982 F.2d 693 (2nd Cir. 1992), was not helpful in the analysis:
While the Altai test may provide a useful framework for assessing the alleged nonliteral copying of computer code, we find it to be of little help in assessing whether the literal copying of a menu command hierarchy constitutes copyright infringement. In fact, we think that the Altai test in this context may actually be misleading because, in instructing courts to extract the various levels, it seems to encourage them to find a base level that includes copyrightable subject matter that, if literally copied, would make the copier liable for copyright infringement. . . . We think that extracting menu command hierarchies down to their individual word and menu levels and then filtering idea from expression at that stage, as both the Altai and the district court’s test require, obscures the fundamental question of whether a menu command hierarchy can be copyrighted at all. The initial inquiry should not be whether individual components of a menu command hierarchy are expressive, but rather whether the menu command hierarchy as a whole can be copyrighted. 49 F.3d at 815.
The First Circuit then found that the menu command structure was a “method of operation” and was therefore uncopyrightable subject matter under 17 U.S.C. § 102(b). Id. As explained by the Court:
The Lotus menu command hierarchy provides the means by which users control and operate Lotus 1-2-3. If users wish to copy material, for example, they use the “Copy” command. If users wish to print material, they use the “Print” command. Users must use the command terms to tell the computer what to do. Without the menu command hierarchy, users would not be able to access and control, or indeed make use of Lotus 1-2-3’s functional capabilities. Id.
Furthermore, even accepting the district court’s finding that the developers of the Lotus command structure made some expressive choices in selecting and arranging the command terms, this did not alter the fact that the command structure is still a “method of operation” and therefore uncopyrightable. Because “users operate Lotus 1-2-3 by using the Lotus menu command hierarchy, and . . . the entire Lotus menu command hierarchy is essential to operating Lotus 1-2-3,” the fact that the hierarchy could have been designed differently was immaterial. Id. at 816. “Methods of operation” are uncopyrightable regardless of whether they contain elements of expression. They are not limited to extractions. Id.
The court also found that the Supreme Court’s landmark decision in Baker v. Selden, 101 U.S. 99 (1879), supports its finding that “methods of operation” are not limited to mere extraction:
“[T]he teachings of science and the rules and methods of useful art have their final end in application and use; and this application and use are what the public derive from the publication of a book which teaches them. . . . The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters-patent.”
Id. at 816-17 (quoting Baker v. Selden, 101 U.S. at 104-05). In the same way, according to the First Circuit, the Lotus command structure was written so that people could learn it and use it. Therefore, “it falls squarely within the prohibition on copyright protection established in Baker v. Selden and codified by Congress in § 102.” Id. at 817.
The First Circuit also found that the Lotus command structure was analogous to the buttons used to control a video cassette recorder (“VCR”). When a Lotus user chooses a command, like “Print” either by highlighting it or typing the letter “P,” the user effectively pushes a button in the same way one presses “Play” on the VCR. Id.
Finally, the First Circuit found that compatibility between programs further supported its finding that the command structure is “method of operation.” Id. at 817-18. The court found that if the command structure were copyrightable, then in order for one to use several different programs, he or she would have to learn how to perform the same operation in a different way for each program used. According to the court:
For example, if the user wanted the computer to print material, then the user would have to learn not just one method of operating the computer such that it prints, but many different methods. We find this absurd. The fact that there may be many different ways to operate a computer program, or even many different ways to operate a computer program using a set of hierarchically arranged command terms, does not make the actual method of operation chosen copyrightable; it still functions as a method for operating the computer and as such is uncopyrightable.
Id. at 818. The court also found it problematic that if the command structure were copyrightable, a user would not be able to use a macro that he or she created to use in Lotus to perform the same operation in another program, even though the macro is the user’s own work product. Id.
Hence, the First Circuit found that the Lotus command structure was not copyrightable subject matter and was not infringed when Borland copied it. Id. at 819.
(d) Supreme Court Decision. The First Circuit’s opinion was affirmed by an equally divided (4-4) court in a memorandum decision. Justice Breyer took no part in the consideration of the case. Lotus Development Corporation v. Borland International, Inc., 116 S.Ct. 804 (1996).
4) Copyright Conclusions. In the 1980’s it was established that copyright applied to protect against literal copying of source code and object code. During this period, the scope of copyright protection for programs was generally in a state of expansion. Beginning with the decision of the Second Circuit in Computer Assoc. v. Altai many courts have followed its lead in adopting the three-step extraction/filtration/comparison test that it used to determine that the conduct in question, involving non-literal copying, did not constitute copyright infringement. It is generally believed that application of the test narrows the scope of protection for non-literal elements of software under the copyright laws. The First Circuit’s decision in Lotus v. Borland may trigger a further narrowing of the protection afforded non-literal elements of software. However, because of the Borland court’s observation that patent protection might be more appropriate for menu command hierarchies, “one up-shot of Borland is that many knowledgeable companies who believe they have made valuable functionable developments are now exploring, more than ever, the possibility of obtaining patent protection.”
III. TRADE SECRET PROTECTION FOR COMPUTER SOFTWARE
Trade secret law has been one of the primary methods for protecting computer software. Unlike patent or copyright protection, government action is not required in order to protect trade secrets. One of the enormous benefits of trade secret protection is that it has no set duration, rather the trade secret is protected until the secret has been disclosed. This section will examine (1) the general requirements for trade secret protection of computer software under Georgia’s Trade Secrets Act of 1990, (2) the protections afforded computer software trade secrets under Georgia’s criminal code; and (3) some limitations of trade secret protection for computer software.
1) Georgia Trade Secrets Act of 1990. Trade secrets, unlike patents and copyrights, are protected by state law. The two major sources for state statutes are the Uniform Trade Secret Act (“UTSA”), as amended in 1985, and the Restatement of Torts (First). Georgia’s trade secret statute, like most states, is patterned after the UTSA. The Georgia Trade Secret Act (“GTSA”) defines a “trade secret” as:
[I]nformation, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:
(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
As the definition indicates, computer software programs qualify for trade secret protection but only if the two prong test set forth in O.C.G.A. § 10-1-761(4)(A) and (B) is satisfied.
In order to satisfy section (A) of O.C.G.A. § 10-1-761(4), a plaintiff must be able to prove that the computer program is not generally known outside of the corporation or “readily ascertainable by proper means.” Georgia courts have not enunciated a test for determining whether a trade secret is generally known outside of the business. However, the Second Circuit uses a test which determines whether the plaintiff can prove that “except by use of improper means, there would be difficulty in acquiring the information.” Similarly, other courts follow this rule. In the field of computer software, this rule is not as clear as it is in other areas of trade secret law. For instance, although information that is generally known cannot be considered a trade secret, generally known computer elements may gain trade secret protection because of their unique combination.
As for whether a trade secret is “readily ascertainable,” The comments to the Uniform Trade Secrets Act suggest that computer software would be “readily ascertainable” if it was available in “trade journals, reference books, or published materials.” Computer software might also be considered “readily ascertainable” if it lent it itself “to being readily copied as soon as it was available on the market.”
Additionally, the computer program which seeks to be treated as a trade secret must provide an economic advantage to the owner over those individuals who do not have access to the trade secret. For example, in Computer Max, Inc. v. UCR, Inc., a Georgia district court noted that the plaintiff’s computer system was the main source of income for its owner, who derived revenue by licensing the program to users. Similarly, in Cybertek Computer Products, Inc. v. Whitfield, a California court noted that the plaintiff charged license fees between $100,000 and $200,000 for the right to use plaintiff’s computer system.
The second prong of Georgia’s trade secrets test involves determining whether the computer program is subject to reasonable efforts to maintain its secrecy under the circumstances. In order to satisfy this requirement, companies should set up and enforce policies regarding the protection of trade secrets. These policies should protect against disclosure both internally to employees and externally to competitors. In other states, reasonable efforts have been held to include: (1) licensing the computer system under license agreements that strictly prohibit disclosure of the computer program to third parties; (2) requiring employees to sign non-disclosure agreements; (3) restricting access to the area where the computer program is being developed or used; (4) locking the doors to the premises; (5) limiting the dissemination of articles which discuss the computer software; (6) maintaining information in locked files; (7) placing warnings on the program; and (8) using confidential or proprietary legends on all printouts of the software and on any documentation or packaging related thereto. Courts have held that since only “reasonable effort” are required to maintain secrecy, a limited disclosure, for a brief period of time, may not automatically defeat trade secret protection.
Of particular importance to software protection is the fact that courts have held that source code for computer software may be considered a trade secret even though the object code was not maintained as a secret. For instance in Telex Corp. v. IBM, the court found that IBM’s source code, which was protected from disclosure, was a trade secret even though the object code was in daily, open unrestricted use by employees.
Georgia’s trade secret statute protects only against misappropriation. The key to the definition of “misappropriation” is “improper means.” “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a confidential relationship or other duty to maintain secrecy or limit use or espionage through electronic or other means. A common law “duty to maintain secrecy” can arise from a confidential relationship, such as an employer/employee relationship, provided the employee is “given notice of what material is to be kept confidential” and it applies “only as to information which the employer has treated as secret.” A contractual duty can include a duty to “limit the use” of a trade secret, a circumstance often imposed in license agreements limiting use of the disclosed information to particular applications.
If a person does not use improper means to acquire knowledge of a trade secret, he may still be guilty of misappropriation, if “at the time of disclosure or use” the acquirer “knew or had reason to know” that the trade secret was: (1) derived from or through a person who utilized improper means to acquire it (e.g. a thief, a wire tapper); (2) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use (e.g., a licensee); (3) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limits its use (e.g., an ex-employee), or (4) acquired by accident of mistake (e.g., an inadvertent disclosure). Since the GTSA extends liability to third parties who “knew or had reason to know” that the information was derived or acquired improperly, “[a] pure heart, empty head defense is not available.” However, if a person has undergone a “material change in position” prior to the time he or she knew or had reason to know that the information received was a trade secret, some leniency may be shown. In that “exceptional circumstance,” damages for past conduct would not be awarded, but future use of the trade secret would be conditioned upon payment of a reasonable royalty.
The GTSA provides for a wide variety of remedies, including injunctive relief, damages, exemplary damages, not to exceed twice the award of damages, if malicious misappropriation exists, and attorneys’ fees. Damages may be awarded “in addition to or in lieu of an injunction.” Damages may include the actual loss to the plaintiff and the unjust enrichment benefit received by the misappropriation so long as the same item is not counted as both a loss to the trade secret owner and an unjust benefit to a misappropriation.
2) Protections Afforded Trade Secrets Under Georgia’s Criminal Law. Georgia’s criminal law also protects trade secrets. For example, Georgia law makes it unlawful for:
Any person who, with the intent to deprive or withhold from the owner thereof the exclusive use of a trade secret, or with an intent to appropriate a trade secret to his or her own use or to the use of another, does any of the following:
(1) Takes, uses, or discloses such trade secret to an unauthorized person;
(2) Acquires knowledge of such trade secret by deceitful means or artful practice; or
(3) Without authority, makes or causes to be made a copy of an article representing such trade secret . . . .
The definition of a trade secret in the criminal code is identical to the civil definition.
Anyone who is found guilty, shall be punished by imprisonment for “not less than one nor more than five years and by a fine of not more than $50,000.” However, if the trade secret was worth less than $100 dollars, a conviction shall be punished as a misdemeanor.
Another criminal provision, which also provides a civil remedy, is the Georgia Computer System Protection Act. This Act does not protect trade secrets directly, rather it protects computers and computer software generally. The Act makes it illegal for someone to commit computer theft, computer trespass, computer invasion of privacy, computer forgery or computer password disclosure. The Act provides for civil remedies under which a plaintiff may recover damages as well as the costs of bringing a suit. A criminal conviction for password disclosure is punishable by a fine of not more than $5,000 and/or imprisonment for up to one year. A criminal conviction for computer theft, computer trespass, computer invasion of privacy or computer forgery potentially subjects the defendant to very severe penalties, i.e. a fine of not more than $50,000 and/or imprisonment for not more than fifteen (15) years.
3) Limitations of Trade Secret Protection. The major limitation of trade secret protection is that it does not protect computer software from reverse engineering or independent development, as those are not considered “improper means.” Reverse engineering involves the “dismantling of an object in order to determine its contents and makeup.” Independent development is where “two competitors develop the same product independently” of one another. The lack of protection against reverse engineering and independent development is one of the major differences between trade secret and patent protection for computer software. However, the lack of protection against reverse engineering may not be a great concern. For instance, one commentator noted that experienced programmers acknowledge that reverse engineering is “a relatively rare and unseemly practice.” Further, “the defense of reverse engineering is often theoretical; a defendant will assert that no trade secrecy can exist because the code could easily have been reverse engineered even though it has not in fact done.”
In general, trade secret protection is considered “fragile because there is no recapturing a secret once it has been released.” For instance, if an employee stole the source code for computer software and posted it on the Internet, the trade secret would be lost. The only remedy would be a suit against the individual employee, who may or may not be able to compensate the employer for the loss. Therefore, when analyzing the benefits of trade secret protection for computer software, one should analyze the risk that the trade secret may be lost. However, despite the drawbacks of trade secret protection, it remains an important method by which to protect computer software.
IV. PATENT PROTECTION FOR COMPUTER SOFTWARE
Patents provide, in many ways, broader protection than other traditional forms of intellectual property protection, i.e. copyright and trade secret law. Computer software may be patented if the patent claim satisfies five basic requirements: (1) patentable subject matter, (2) usefulness, (3) novelty, (4) non-obviousness, and (5) disclosure. Over the years, patent protection has proved difficult to obtain for computer software. However, that is changing and the number of software patents has been increasing as more and more companies look to patent law to help protect their computer software.
In order to better understand the issues regarding patent protection for computer software, this section will address: (1) the problems associated with computer software being considered patentable subject matter, (2) the difficulties associated with computer software satisfying the other four basic requirements for a patent, usefulness, novelty, non-obviousness, and disclosure, and (3) the enormous benefits that may be attained from patent protection.
1) Patentable Subject Matter. Whether a patent claim for computer software is or is not patentable subject matter is not a clear cut decision, because of the Supreme Court decisions excluding mathematical algorithms from patentable subject matter. Congress has defined patentable subject matter to include “any . . . process, machine, manufacture, or composition of matter, or any . . . improvement thereof.” Despite the apparent breadth of patentable subject matter, the Supreme Court has held that three categories of subject matter are not entitled to patent protection, namely “laws of nature, natural phenomena, and abstract ideas.” The Supreme Court has consistently held that a mathematical algorithm is a “law of nature” and, therefore, it is not entitled to patent protection.
The Supreme Court’s exclusion of mathematical algorithms from patentable subject matter was the root of the problem regarding the patentability of computer software. The problem arose because “[computer] programs are used to efficiently solve mathematical algorithms” or they embody mathematical algorithms.
The confusion regarding the patentability of computer software was eased somewhat after the Supreme Court’s decision in Diamond v. Diehr. In Diamond, the Supreme Court stated that computer software was entitled to patent protection even if part of the claim involved a mathematical algorithm. The Supreme Court stated that:
[W]hen a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect . . ., then the claim satisfies the requirements of §101.
Following Diamond, the focus was whether a claim as a whole was directed to statutory subject matter. It became irrelevant that a claim contained, as part of the whole, matter which was not patentable by itself. For example in In re Alappat, the Federal Circuit held that:
Although many, or arguably even all, of the means elements recited in [the] claim . . . represent circuitry elements that perform mathematical calculations, . . ., the claimed invention as a whole is directed to a combination of interrelated elements which combine to form a machine . . . . This is not a disembodied mathematical concept which may be characterized as an “abstract idea,” but rather a specific machine to produce a useful, concrete, and tangible result.
Following the Diamond decision, the Federal Circuit, which has exclusive jurisdiction over appeals from district court’s patent decisions, adopted a test for determining whether a computer-related patent is statutory subject matter, the Freeman-Walter-Abele test (so named for the cases that it was based upon). The test requires that the patent claim first be analyzed to determine whether a mathematical algorithm is recited, either directly or indirectly. If no mathematical algorithm is recited, the claim involves statutory patentable subject matter. If the claim “implements or applies . . . [an] algorithm in a structure or process that, when considered as a whole, performs a function the patent laws were designed to protect,” the claim is patentable subject matter. The goal of the two part test is to determine whether the invention is a mathematical algorithm which is not patentable or the invention is an application of an algorithm which is patentable.
The Freeman-Walter-Abele two-step test is relatively simple and straightforward. However, the application of the test to a complex computer-related invention involving a mathematical algorithm demonstrates that no bright-line test for distinguishing statutory from non-statutory inventions can be drawn. Although no bright-line test may be enunciated, the Patent and Trademark Office’s new guidelines should prove enormously helpful in not only determining what is patentable but also how to successfully obtain a patent.
On February 28, 1996, the Patent and Trademark Office (“PTO”) issued new guidelines for examination of computer-related inventions. The guidelines offer specific guidance to what is and what is not patentable. The guidelines should not only help eliminate uncertainty regarding what is and is not patentable but also help applicants successfully prosecute a patent. For instance, the new guidelines attempt to change the application process from an adversarial one to a cooperative one by encouraging the examiners, when a claim is non-statutory, to “identify the features of the invention that would render the claimed subject matter statutory if cited in the claim.”
2) Additional Requirements for Patentability. In addition to being considered patentable subject matter, a patent claim must be utilitarian, novel and non-obvious. The requirement of utility only requires that the software perform a function, and, therefore, usefulness should not pose a problem for patent protection. However, the requirements that a patent be novel and non-obvious may present a problem for many claims. It has been noted by commentators that software programs are often valuable not for their novelty, but rather for the “tremendous amount of work (which may be totally lacking in creativity) engendered in creating them.” In the late 1980’s one commentator noted:
[T]he major obstacle [to patentability] is posed by the fundamental prerequisite of “invention” (encompassing the requirements of novelty and non-obviousness) . . . It has been estimated that less than one percent of all computer programs in the United States are sufficiently innovative to meet the standard requirements for “invention.” As a result of such practical difficulties, the use of patent law for the protection of computer programs has been limited . . . .
Although these requirements may be an obstacle, they should not be considered an insurmountable obstacle. As one commentator stated, “The numerous software patents that have been cascading out of the Patent Office suggest that [the common perception that the novelty and non-obviousness requirements are too stringent for programs] may . . . have met its demise.”
The final requirement for a patent claim is disclosure. Disclosure requires that the patent claim disclose the invention so that a person skilled in the art is able to make and use the invention in the most effective manner. This requirement poses a problem for many software developers who do not wish to disclose the entire program as it would give competitors access to information that they would not otherwise be able to gain without significant effort. However, most software patents have issued without the claimant having to disclose the program code. Similarly, the new PTO guidelines do not contain a requirement that all of the program code be disclosed. Therefore, the fear of disclosing sensitive material may not be as serious as once feared.
3) Benefits of Patent Protection. A patent provides substantial protection for computer software. The protection that a patent provides is “the right to exclude others from making, using, and selling the invention.” Since a patent prohibits individuals from making or using the invention, patents are not “subject to a defense of independent development, which is applicable to both trade secrets and copyrights.” “A patent also protects the ideas, procedures, processes, systems or control functions underlying computer programs [which] are precluded by statute from copyright protection.” Another advantage of patent protection is that the large amount of judicial precedents in the area of patents regarding how to “compare patent claims with a competitor’s product to determine infringement,” makes the scope of patent protection far more certain than that offered by copyright, where the courts are still attempting to define what constitutes a copy of a copyrighted work.
Other advantages of a patent include: (1) a patentee need not prove copying in an infringement suit as opposed to a copyright suit; (2) ease of licensing and maintenance; (3) a patent permits disclosure, which can be an important marketing tool and precludes the need to devote efforts to maintaining secrecy; (4) a patent is suited to proliferation; and (5) the long duration of patent protection.
The enormous protection a patent offers may be very lucrative for the owner. For instance, Dan Bricklin, the inventor of the “VisiCalc,” the first electronic spreadsheet for personal computers, commented that he would have made “several hundred million dollars” if he had obtained a patent.
Finally, some of the disadvantages regarding obtaining a patent, such as the time and expense involved in obtaining a patent, may also be decreasing. The new PTO guidelines may decrease the time and expense necessary to obtain a patent because they “encourage examiners to raise any issue that may affect patentability in the first office action.” Some PTO examiners do not completely review an entire application before issuing an office action, rather they issue the office action when they encounter the first flaw in the application. This approach lengthened the examination process and increased the cost for obtaining a patent.
Any inventor must seriously consider patent protection for computer software because of the wide array of protections and advantages that patents afford.
4) Patent Conclusions. Although a software patent provides a great deal of protection, commentators have noted that there appears to a “anti-patent bias.” This “anti-patent bias” may have arisen from the expense, the time, the belief by some in the computer software industry that their work should be available to others to use and improve on, and the uncertainty regarding obtaining a patent due to the lack of clarity regarding what constitutes patentable subject matter. In any event, the new PTO guidelines should help alleviate these problems and increase the number of applications made for software patents. Furthermore, enforcement of software patents is usually successful, although costly, which should increase the value of software patents. Therefore, practitioners should consider patent protection when determining how best to protect computer software.
V. TRADE DRESS PROTECTION FOR COMPUTER USER INTERFACES
1) Introduction. A product’s trade dress “is essentially its total image and appearance.” It “involves the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.”
In order to establish a claim of trade dress infringement under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and preclude a defendant from using confusingly similar trade dress, a trade dress owner must establish (1) that the trade dress qualifies for protection and (2) that the trade dress has been infringed by the defendant.
Trade dress is protectable if it is inherently distinctive, that is, if “it is capable of identifying products or services as coming from a specific source.” The trade dress of a product is also protectable, even if it is not inherently distinctive, if it has acquired secondary meaning. As described by the Supreme Court in Two Pesos, Inc. v. Taco Cabana, Inc.,
Secondary meaning is used generally to indicate that a mark or dress “has come through use to be uniquely associated with a specific source.” “To establish secondary meaning, a manufacturer must show that, in the minds of the public, the primary significance of a product feature or term is to identify the source of the product rather than the product itself.”
In addition, trade dress is entitled to protection only if it is nonfunctional. As explained by the Supreme Court in Two Pesos:
[A] design is functional, and thus unprotectable, if it is one of a limited number of equally efficient options available to competitors and free competition would be unduly hindered by according the design trademark protection. This serves to assure that competition will not be stifled by the exhaustion of a limited number of trade dresses.
If trade dress protection were available for functional designs, such protection “would grant a perpetual monopoly over features that could not be patented.”
Finally, if a plaintiff establishes that its trade dress is non-functional and is either inherently distinctive or has acquired secondary meaning, in order to prevail on a trade dress infringement claim, it must establish that the defendant’s trade dress is so similar to the plaintiff’s trade dress that there is a likelihood that consumers will believe that the two products originate from or are affiliated with the same source.
Because the scope of copyright protection that is available for user interfaces has been substantially narrowed by the courts in recent years, several commentators have addressed the question of whether user interfaces can be protected as trade dress. However, this issue has only been discussed by the courts in two cases, and trade dress protection for user interfaces was soundly rejected in each case.
2) Reported Decisions Addressing Trade Dress. In Interactive, Inc. v. NTN Communications, Inc., the Northern District of California found that the three-level prediction scheme of its video football game and various aspects of its scoring and bonus systems did not constitute protectable trade dress because they were functional. In making this determination, the court found that these elements were “essential to how consumers enjoy[ed] [plaintiff’s] game; they [were] hardly ‘an assurance that a particular entity made, sponsored, or endorsed a product.'” In addition, they “[were] clearly essential to [the game’s] ‘use or purpose or . . . affected the cost or quality of’ [the game].” Because these features were “so intimately related to the purpose of the interactive football game . . . to label them as ‘nonfunctional’ would render that term meaningless.”
In Engineering Dynamics, Inc. v. Structural Software, Inc., the Fifth Circuit affirmed the Eastern District of Louisiana’s finding that the defendant did not infringe the plaintiff’s trade dress rights in its user interface. In making this finding, the court did not reach the issue of whether the user interface constituted protectable trade dress. Rather, the court simply found that there was no likelihood of confusion between the parties’ programs. Both programs were targeted at a fairly limited and sophisticated market, the printed pages of reports generated by the programs clearly identified the plaintiff or defendant as the vendor of the program, and there were no incidents of actual confusion between the programs. Accordingly, even if the program trade dress had been protectable, the defendant’s program did not infringe the trade dress of the plaintiff’s program.
Both of these cases demonstrate the obstacles which a software producer will face when trying to seek trade dress protection for its user interface. Assuming that one can establish that its user interface is inherently distinctive or has acquired secondary meaning, it will be very difficult to prove that the user interface is non-functional. As one group of commentators has stated:
The user interface for a computer program would seem to be functional by its very nature — it is the way in which the user obtains utility from the software. While specific visual elements of the interface arguably might be protectable, most elements of the user interface are intended to communicate or enable a specific feature or operation, and thus would seem to be as functional as the labels “on” and “off” on the computer’s power switch.
Furthermore, as stated by one commentator, “[i]n most instances, it seems likely that if an element of a user interface can pass the functionality and distinctiveness test, it will be copyrightable as well.”
It will also be very difficult to establish that there is a likelihood of confusion as to source between the defendant’s user interface and the plaintiff’s interface. Because a product’s labeling, packaging and advertising are important factors in considering whether there is a likelihood of confusion between trade dresses, one commentator predicts that “would-be copiers of unpatented/un-copyright-protected goods or features could find a safe harbor by prominently marking the goods with their own distinctive trademarks and trade names.”
3) Trade Dress Conclusions. Based upon the foregoing, it is doubtful that a software producer will be able prove that its user interface (1) is inherently distinctive or has acquired distinctiveness, (2) is non-functional, and (3) that there is a likelihood of confusion as to source between the defendant’s user interface and the software producer’s user interface. In fact, as one commentator concludes:
[T]he courts are increasingly “getting back to basics,” and the “basics” of trade dress doctrine is not protection of innovativeness or creativity, but avoidance of consumer confusion as to the source of products. Whatever the theoretical possibilities for expanding protection for computer software through the trade dress doctrine, there is no evidence that there has ever been any need for such protection based on any actual consumer confusion. The theory has never prospered in the courts, and such claims have seldom or never been asserted except in tandem with more substantial copyright claims. As the courts adopt a more sophisticated and critical approach to product configuration trade dress claims, it grows even less likely that the theory will be of continuing use to remedy any real or imagined wrongs. Perhaps the time has come to bury the moldering corpse of trade protection for user interfaces.
VI. ENFORCEABILITY OF SHRINKWRAP LICENSES
The issue of whether shrinkwrap licenses are enforceable is unsettled in the courts. In the Seventh Circuit, “Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).” However, in the Third Circuit and in the District of Arizona, the enforceability of shrinkwrap licenses is debatable.
1) Reported Decisions Addressing Shrinkwrap Licenses. In Step-Saver Data Systems, Inc. v. Wyse Technology, the Third Circuit held that a license printed on the box-top of a software product shipped to the plaintiff was not part of the parties’ original agreement and that, consequently, the plaintiff was not bound by the disclaimer and limitation of remedies terms of the box-top license. In Step-Saver, the plaintiff designed and marketed multi-user computer systems and purchased and resold nearly 150 copies of defendant’s operating system software to use with the multi-user systems. The plaintiff ordered copies of the software by placing orders over the telephone and sending purchase orders, and the defendant agreed to ship the requested number of copies promptly, along with an invoice. No reference to a license agreement was made during the telephone conversations between the plaintiff and the defendant or on the purchase orders or invoices. However, the shipped product contained a license on the packaging which stated that “Opening this package indicates your acceptance of these terms and conditions,” and the license provided that the purchaser could return the product unopened if it disagreed with the terms of the license. The license expressly limited the purchaser’s remedies to replacement of a defective disk and disclaimed all express and implied warranties except for a warranty that the disk was free from defects.
Shortly after the plaintiff and installed resold defendant’s operating system software as part of plaintiff’s multi-user systems, plaintiff received numerous complaints from its customers. Several customers eventually filed suit against the plaintiff, and the plaintiff in turn filed suit against the defendant for breach of warranty. The defendant contended that the plaintiff’s remedies were limited by the license agreement and that it had disclaimed the plaintiff’s breach of warranty claims. The district court agreed with the defendant and held that the plaintiff was bound by the terms of the box-top license agreement. On appeal, the Third Circuit reversed.
The Third Circuit held that the parties formed their original contract to purchase the software when the purchaser placed its order by telephone and that the box-top license was merely a proposed modification to the original contract by the manufacturer. Because the purchaser never expressly agreed to the terms of the box-top license, the question of whether it became a part of the original agreement was governed by § 2-207 of the Uniform Commercial Code. Under § 2-207, “proceeding with a contract after receiving a writing that purports to define the terms of the parties” contract is not sufficient to establish the party’s consent to the terms of the writing to the extent that the terms of the writing either add to, or differ from, the terms detailed in the parties “earlier writings or discussions.” Because the terms of the box-top license materially altered the original terms of the contract, the box-top license could not be incorporated into the contract without the plaintiff’s consent, and the plaintiff could bring its claims for breach of warranty against the defendant.